FOCUS: Tight supply to support Asian methanol

17 November 2006 03:59  [Source: ICIS news]

By Anu Agarwal

SINGAPORE (ICIS news)--Overall tight supply, healthy demand and low inventories may keep Asian methanol prices firm until the end of this year, producers and traders said on Friday.

With inventory with most producers and large buyers at low levels and the turnaround at Iran’s 1 million tonnes/year Fanavaran facility expected to last until early December, high prices are likely to continue for a few more months, a key Asian trader said.

Asian methanol prices have surged nearly 70-80% since mid-August to $450-490/tonne CFR (cost and freight), on the back of sustained tight supply as several plants across the world underwent planned and unplanned outages.

A delay in the 1.7m tonnes/year plant at ZaGross in Iran from the second quarter to the end of this year and recent outages at the Indonesian Kaltim’s 660,000 tonnes/year plant has kept supply and demand tightly balanced and provided impetus for high prices, according to a regional methanol producer.

Another reason for the unusually tight supply was the emergence of new applications for methanol, such as in the production of biodiesel, dimethyl ether (DME) and also in gasoline blending in countries like China, several distributors said.

Biodiesel production has already taken off in a big way in Europe, and is emerging in Asia. Several new biodiesel facilities are under construction across Asia as renewable fuels become more popular.

Nearly 1m tonnes of methanol was used in China for gasoline blending alone, according to suppliers and distributors estimates from the country.

Strong economic growth across Asia has also ensured healthy demand from the key downstream formaldehyde sector, producers and traders said.

With the tight conditions only expected to ease once significant new capacity comes on stream, several buyers were hoping for Iran’s Zagross plant to startup quickly.

The next big facility, the 1.1m tonnes/year Oman Methanol plant is likely to come on stream in mid-2007.

By: Anu Agarwal
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